Touchstone sets out reasons for rejecting IP approach
Source - SMW
Touchstone Innovations chairman David Newlands has sent a letter to shareholders to explain the reasons the board rejected IP Group's approach about a possible offer.
Newlands said IP Group announced a firm intention to make an offer on 20 June and received support from three of Touchstone's largest shareholders - Invesco Asset Management, Woodford Investment Management and Lansdowne Developed Markets Master Fund - in respect of 74.3% of Touchstone's shares.
Newlands said that these three shareholders also owned approximately 50% of IP Group.
His letter said: "As I noted in my letter 1st June 2017, I first received a letter from IP Group setting out the indicative non-binding terms for a recommended all-share merger of Touchstone and IP Group on 4th April 2017.
"Since that time a possible transaction has been described by IP Group variously as a 'merger', a 'takeover' and a 'combination'.
"Notwithstanding these differing descriptions, the offer represents an unwelcome hostile takeover offer.
"During the discussions that the board of Touchstone has had with IP Group since April, we have raised a number of topics that we believe would need to be addressed in order for a combination to be capable of being recommended by your board.
"These included the need for agreement on valuation, people, strategy and business model, and portfolio balance.
"Having considered the firm intention announcement carefully, your Board notes that the offer does not address the concerns that your board had surrounding the possible offer and that consequently the offer is also not capable of recommendation by your board."
He said that the financial terms of the offer fundamentally undervalued Touchstone on a standalone basis.
His letter also looked at the offer in terms of the present staff; strategy and business model and portfolio balance.
In conclusion, the letter says: "This situation has now been live for nearly three months and your board believes that it has had a detrimental effect on new business and on our relationships with co-investors.
"Morale is being undermined, recruitment plans are on hold and our employees are uncertain about their future.
"Your board has reviewed the Offer carefully and, after taking all the reasons set out above into account and receiving the advice of our advisers, continues to be of the view that it cannot recommend the Offer on its current terms.
"Your board notes that IP Group has said in the firm intention announcement that it remains open to engagement at any point regarding the offer.
"If IP Group were to seek to improve the terms of the offer, then your board would similarly be open to engagement to discuss any improved terms.
"Your board advises the company's shareholders to take no action in relation to the offer."
At 8:17am: (LON:IVO) Touchstone Innovations PLC share price was +0.25p at 286.75p